CIOs win CEO race by looking outside

Eager to jump to a coveted CEO spot? Analysts say you stand a better chance by looking outside your current company. Jennifer Recktenwald looks at this growing trend and talks to some chief executives who made the move.

Ron J. Ponder, president and CEO of Beechwood, knows just what today’s CIOs go through to win the sought-after CEO position. He held CIO posts at three Fortune 500 companies before joining Beechwood, a provider of IT services for the telecom industry, and he found that each new job offered a new challenge that later paid off.

“A CIO can either try to work their way up in their own company, try to branch out horizontally or laterally, or they can get into another field. Or they can go to a smaller company as a president or a CEO,” Ponder said. “I found the change [to a smaller company] invigorating. I wanted a smaller environment. I wanted to be able to make decisions, take risks, mold the operation, because I wanted to put my experience to work. I just had to find the right company.”

In this article, we’ll explore:

· Why looking outside is more advantageous than waiting for a promotion.

· Why former-CIO CEOs wanted to move on.

· How CIOs should deal with headhunters.

In future articles in this series, we’ll talk to some bold entrepreneurs who created CEO positions for themselves, and we’ll examine the challenges that a “green” CEO faces at the onset of the job.

Through the looking glass: The chances are better outsideTraditionally, American corporations have had succession plans in place and promoted a new CEO from within the organization. Experts say this makes for the smoothest transition, because the incoming CEO knows the corporate culture, the employees, and the executive board.

But whether a CIO can expect to be promoted to CEO depends on the market and the individual’s value within it.

“If you’re in a company where your CEO is pretty young, it’s a new company, or it’s doing well, you can see signs of how willing a person is to retire,” said Mary Ann Masarech, product manager of career transitions at Drake Beam Morin, a Stamford, CT-based an outplacement and career transition firm. “You should look at the history of the organization. Where did the last few CEOs come from? Did they move up from within the organization? Does the board have a demonstrated preference for a certain functional area?”

With today’s exploding growth in executive-level IT jobs, many CIOs are having better luck by leaving companies to take CEO positions elsewhere.

“In general, that’s what happens in the full-employment, active-growth market that we have right now,” said Phil Simshauser, who serves as Drake Beam Morin vice president and president of the firm’s Center for Executive Options. “Individuals, regardless of discipline, are able to promote themselves and improve their situation by going outside rather than pursuing internal opportunities. It’s the nature of the times.”

Consultants at other firms are seeing the same pattern. Mark Lewis, managing director and head of corporate IT practice for Christian &Timbers, said the trend to move outside crosses all fields.

“For any position, whether it’s a CIO, a chief marketing officer, or a division general manager, companies are considering and actually hiring outsiders more than they used to,” he said. “The fact that CIOs are not frequently considered as internal CEO candidates may not be different from the fact that CFOs or heads of marketing also get overlooked.”

The enticement of new challengesCIOs who look outside for top-level positions, however, say it’s not just the job market that prompted their moves. For many, the chance for new experiences is usually more of a determining factor.

Ponder held several CIO posts—at Federal Express, Sprint, and AT&T. Each move—even his recent step to Beechwood—was triggered by his desire to take on a new project with opportunities to learn new skills.

“I had been at Federal Express for 17 years, and I left because it was time to move to a different arena, a different set of opportunities. I’d been in transportation for so long, and I wanted to get into telecommunications. It took a long time for me to find the opportunity that I wanted. I was patient. I carefully evaluated the opportunities, and, when the right one came along, I made that move.”

Ponder was on board at AT&T when the company was split up, and he believes that experience was invaluable. When he was approached by Beechwood, Ponder again was ready for a move.

“I had a longing to be back in a smaller enterprise,” he said. “I was also trying to stay in the areas I knew. I did not want to take the leap of running an organization in an area where I had no business experience. I stayed where I had a solid background where my learning curve would be zero, at least for part of the job.”

Katherine Hudson, CEO of Brady Corporation, a Milwaukee-based manufacturer of industrial products, wasn’t looking to leave her post as Eastman Kodak’s corporate vice president and general manager of its Professional, Printing and Publishing Imaging Division.

“I got a message from a headhunting firm, one I didn’t recognize. I thought it was a customer. When you get a call from a customer you return it right away,” Hudson said. She would typically tell recruiters she wasn’t interested, but she liked what she heard about Brady and “fell in love with it. So I’m sort of an accidental CEO.”

Ron J. Ponder, president and CEO of Beechwood and former CIO at Federal Express, Sprint, and AT&TAccomplishments: Devised the creation of FedEx’s tracking system, created critical billing systems for Sprint and AT&T.Words of wisdom: “I wasn’t the narrow kind of CIO. I didn’t wait for people to come to me and tell me, ‘I need you to build this.’ I really got involved in learning the business and moving to where the customer was. I made certain that I understood how the company functioned, all the way from the customer to the final component that you would need to satisfy the customer process.”Jim Rutt, CEO of Network Solutions, Inc., and former CTO of The Thomson CorporationAccomplishments: Played a key role in nearly every major acquisition and venture investment decision as Thomson assembled a portfolio of businesses in recent years; instrumental in accelerating Thomson's evolution from a traditional print publisher to its current position at the forefront of electronic information delivery. Words of wisdom: ”The CEO job, by its nature, is very broad. Unfortunately, many technical people define their job pretty narrowly. And if you define your job narrowly, you’re never going to be prepared to be a CEO. You have to define your job broadly, as part of the senior management team and weigh in and have informed points of view about all aspects of the corporation.”Katherine Hudson, CEO of Brady Corporation and former CIO and corporate vice president of Eastman KodakAccomplishments: Oversaw Kodak’s Professional, Printing and Publishing Imaging Division, a $2 billion sales operation, which sold film to professional photographers and imaging materials and equipment to the graphic arts industry.Words of wisdom: “I think a career is an accumulation of experiences. You take into every new position everything you’ve learned so far. I had a healthy sense of curiosity. When I had an opportunity to go sideways in an organization, I took that chance.”Prime yourself for headhuntersFor the CIO who is only casually looking for a move up, being ready for a call from a headhunter is imperative, experts say. Unfortunately, few CIOs are actually prepared for it. Lewis estimates that only 25 percent of senior executives have a recently updated resume, regardless of whether they are job hunting.

“The resume itself is the end product,” he said. While the resume itself shouldn’t receive a great deal of emphasis, “the thought process of understanding what you bring to the table is best fleshed out by forcing oneself to package those skills in the form of a resume, even before someone approaches you for a job.

“It’s a lack of business perspective to have not thought enough about your own portfolio of assets to have produced a resume,” Lewis continued. “CIOs and heads of marketing for dot-com companies up to the largest companies thank me for encouraging them to write the first resume they’ve written in five years, even when they were not looking.”

More difficult than updating a resume is getting one in the hands of the right people: recruiters.

Unfortunately, no one recruiter knows about all the job openings that would be of interest to you. By sending the resume out widely to numerous recruiters, experts say, job hunters will be placed in many different confidential databases and be alerted of many different positions.

If a search firm or a recruiter calls and asks for a meeting, the candidate can expect a rigorous interview process.

When interviewing CEO candidates, Christian & Timbers focuses on the details when candidates talk about their accomplishments, probing to learn how things actually got done. If candidates are unable to describe in detail how tasks were accomplished, quickly and succinctly, they probably weren’t the real drivers of that success.

When Network Solutions president and CEO James Rutt was sought out by the company’s headhunters, he faced what he calls an “interminable” interview process.

“I think I came in nine times and talked to 20 people. They asked me everything you could possibly imagine, from strategic questions, to detailed technical questions, to product-oriented questions,” Rutt said. “The biggest shareholder asked me to look at their Web site and write a critique of it. So he gave me a homework assignment. It was a very exhaustive process. It took about three months.”

When Hudson went before Brady’s headhunters, one question she remembers is “What’s the biggest mistake you’ve ever made?”

“I answered, ‘The biggest mistake I’ve ever made is leaving the wrong person in a job for too long,’” she said. “Apparently that and ‘Not moving fast enough when I knew what I wanted to do,’ are the right answers. I’ve made both of those mistakes, and those were the answers they wanted to hear.”If you're considering a move to CEO, tell us about your experience by posting a comment below. If you have a story idea you'd like to share, please drop us a note.